The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a new Beneficial Ownership “Reporting Rule.” The new rule went into effect on January 1, 2024. Let’s take a look at the new rule and how it may affect your business. Please contact the McWilliams Law Group now if you have any questions.
What Does the Reporting Rule Require?
The new Reporting Rule states that certain businesses must file “beneficial ownership information (BOI) reports,” or “BOI reports, to FinCEN. These reports must provide certain information about:
- The business entity that is reporting,
- The company’s “beneficial owners,” and
- “Company applicants.”
Please note that a “beneficial owner” is an individual who owns or controls at least 25% of the subject company or has substantial control over the company.
Further, a “company applicant” is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company.
What Companies Have to Report?
Under the new rule, a “reporting company” is a domestic or foreign corporation, limited liability company, or similar entity that:
- Was either formed or registered to do business in any state or jurisdiction by filing a document with a secretary of state, or other similar office, and
- Does not qualify for an exemption.
What Businesses Are Exempt From Reporting?
There are 23 different types of businesses that are exempt from FinCEN’s reporting requirements. Examples include:
- Public companies,
- Banks,
- Securities brokers and dealers,
- Insurance companies,
- Registered investment companies and advisors,
- Pooled investment companies,
- Tax-exempt entities,
- Wholly owned subsidiaries of certain exempt companies,
- Inactive entities, and
- Large operating companies.
When should a business file a report?
FinCEN will start accepting reports on January 1, 2024. However, reporting companies created or registered to do business before January 1, 2024 will have until January 1, 2025 to file their initial BOI reports.
Further, companies created or registered on or after January 1, 2024 will have 30 days after receiving notice of their company’s creation or registration to file their initial BOI reports.
Are There Penalties for Not Reporting?
Yes. The failure to meet reporting requirements can result in civil or criminal penalties. The willful failure to file a complete initial or updated report is punishable by:
- A $500 per-day fine (up to $10,000), and
- Imprisonment for up to two years.
Contact The McWilliams Law Group for Help
When you are ready to open a new business or take your current business to the next level, the lawyers at The McWilliams Law Group are here to help. We can help ensure that your operations provide you with the tax and liability protections that best fit your short- and long-term plans. Our attorneys work closely with business owners throughout Washington and California, providing individualized and strategic advice to help their businesses run smoothly. Contact us now and get the skilled business advice that you deserve.
